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Heterogeneity of Hospitals

Dormont, Brigitte (2014), Heterogeneity of Hospitals, in Culyer, Anthony J., Encyclopedia of Health Economics, Elsevier : Amsterdam, p. 456-461. 10.1016/B978-0-12-375678-7.01314-6

Type
Chapitre d'ouvrage
Date
2014
Book title
Encyclopedia of Health Economics
Book author
Culyer, Anthony J.
Publisher
Elsevier
Published in
Amsterdam
ISBN
978-0-12-375679-4
Number of pages
604
Pages
456-461
Publication identifier
10.1016/B978-0-12-375678-7.01314-6
Metadata
Show full item record
Author(s)
Dormont, Brigitte
Laboratoire d'Economie de Dauphine [LEDa]
Laboratoire d'Economie et de Gestion des Organisations de Santé [Legos]
Abstract (EN)
Payment methods based on a fixed price per diagnosis related group provide hospitals with a perfect incentive for cost reduction. However, costs can rise for some hospitals because of exogenous factors. This situation may bring them to select patients and lower care quality to avoid bankruptcy. To prevent this, payments should allow for legitimate sources of cost heterogeneity. It is possible to design a payment method which allows for unobservable sources of cost heterogeneity, provided they are time invariant. While it reimburses hospitals for extra costs resulting from undesirable long-term moral hazard, this method can induce substantial savings because it provides incentives to reduce costs linked to transitory moral hazard.
Subjects / Keywords
Diagnosis related group (DRG); Efficiency; Exogenous/endogenous cost variability; Heterogeneity; Hospital cost; Moral hazard; Patient selection; Prospective payment system; Quality; Yardstick competition
JEL
I11 - Analysis of Health Care Markets

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